U.S. – SEC Proposed Changes to 13D and 13 G Reporting

U.S. – SEC Proposed Changes to 13D and 13 G Reporting

On Feb. 10, SEC proposed to amend beneficial ownership reporting.

  • SEC proposed to amend certain rules that govern beneficial ownership reporting.
  • Modernize filing deadlines for beneficial ownership reports filed on Schedule 13D, 13G.
  • Accelerate the filing deadlines for Schedules 13D beneficial ownership reports from 10 days to five days and require that amendments be filed within one business day.
  • Generally, accelerate the filing deadlines for Schedule 13G beneficial ownership reports.
  • Expanded the application of Regulation 13D-G to certain derivative securities.
  • Clarify circumstances which two or more persons have formed group subject to beneficial ownership reporting obligations; new exemptions to permit communication.
  • SEC also published fact sheet on modernization of beneficial ownership reporting.

Revised Filing Deadlines

  • Amend Rule 13d-1(a) filing deadline for initial Schedule 13D to five days after the date on which a person acquires more than 5% of a covered class of equity securities.
  • Revise Rules 13d-1(e), (f) (g) to shorten filing deadline for initial Schedule 13D filed by persons forfeit eligibility to report on Sch 13G to 5 days after event caused ineligibility.
  • Proposed to amend filing deadline under Rule 13d-2(a) for amendments to Schedule 13D to one business day after the date on which a material change occurs.
  • Revise Rules 13d-1(b), (d) to shorten deadline for initial Schedule 13G filing for qualified institutional investor (QII), exempt investors to within 5 business days after last day of month in which beneficial ownership first exceeds 5% of covered class.
  • Amend deadline in Rule 13d-1(c), which permits passive investors to file initial Sch 13G in lieu of Schedule 13D within 10 days after acquiring beneficial ownership of more than 5% of a covered class, to five days after the date of such an acquisition.

Regulate Use of Cash-Settled Derivative Securities

  • Add new paragraph (e) to Rule 13d-3 to deem holders of certain cash-settled derivative securities as beneficial owners of the reference covered class.
  • Holders of derivative securities settled exclusively in cash not have enforceable rights or other entitlements for reference security under terms of governing agreement.
  • Under certain circumstances, however, holders of such derivative securities may have both incentive and ability to influence or control the issuer of the reference securities.
  • Accordingly, proposed amendment would deem holders of such derivative securities to beneficially own the reference securities just as if they held such securities directly.
  • Limited to those persons who hold cash-settled derivatives in context of changing or influencing control of issuer of reference security; security-based swap not included.

Amendments to Rule 13d-5

  • Align text of Rule 13d-5 (17 CFR 240.13d-5), as applicable to two or more persons who act as group, with statutory language in SEA Sections 13(d)(3), (g)(3).
  • Intended to remove potential implication that express or implied agreement among group members is necessary precondition to formation of group under SEA provisions.
  • Proposing to add new provision in Rule 13d-5 that would affirm if person, in advance of filing Schedule 13D, discloses to any other person that such filing will be made.
  • Such other person acquires securities in covered class for which Schedule 13D will be filed, then those persons deemed to have formed group within meaning of S 13(d)(3).

Amendments to Rule 13d-6 on Exemptions

  • Set forth circumstances under which two or more persons may communicate with one another, engage with issuer without concern will be subject to regulation as a group.
  • New rule 13d-6(d) (17 CFR 240.13d-6) sets circumstances which 2 or more persons enter into agreement governing derivative security in ordinary course of business.
  • Without concern subject to regulation as group for derivative reference equity security.
  • Two exemptions to provide greater certainty on application of Section 13(d)(3), (g)(3).
  • While ensuring proposed amendments do not have an effect on shareholder communications to execute strictly commercial transactions in the ordinary course of their business.

Disclosure for Derivative Securities

  • Revise Schedule 13D to clarify disclosure requirements for derivative securities held by person reporting on that schedule; specifically, amend Item 6 to Schedule 13D.
  • Amendment to remove any implication that a person is not required to disclose interests in all derivative securities that use a covered class as a reference security.
  • Intended to eliminate any ambiguity on scope of disclosure obligations of Item 6 of Sch 13D as to derivative securities, including derivatives not originating with issuer.
  • Such as cash-settled options not offered or sold by issuer and security-based swaps.

SEC Commissioner Statements

  • Chair Gensler issued supporting statement, update reporting requirements for modern market, reduce information asymmetries, and address timeliness of two key filings.
  • Commissioner Peirce issued dissenting statement; fails to contend fully with the realities of today’s markets or the balance embodied in Section 13(d) of Exchange Act.


  • Comments on proposal due later of 30 days from federal register, or on 11 April 2022